Mineral Resources and Energy Budget: Committee Report; Update on Solar Water Heater programme

Meeting report

Update on Solar Water Heater programme

The briefing was led by the Director-General (DG) of the Department of Mineral Resources and Energy (DMRE), Adv Thabo Mokoena, and the delegation that accompanied him from the Department. The DG touched on the issue of the delay of the release of the solar geysers and that it needed the intervention of the Minister. The Department had previously made a commitment that by the end of February, solar geysers would be on rooftops. The issue was with the suppliers of the geysers.

The presentation covered what led to the significant delays in the implementation of the programme, a revision of the Phase 1 Solar Water Heater (SWH) Implementation Model, the manufacturing of locally-produced products and progress to date, participating entities and key stakeholders, institutional arrangements for the SWH Programme, a programme budget commitment breakdown and progress to date.

The presentation also detailed progress on the removal of SWH systems from supplier storage facilities, the progress on technical feasibility assessment, progress on training preparations, programme fiscus budget, financial implications and mitigation, the commencement of the training and installation phase, SWH Programme roll out timeframe, database management system and recommendations.

Please see presentation for details

Discussion

Mr M Mahlaule (ANC) commented that the amount that has been spent on the solar geysers and the actual geysers are not proportionate. He then referred to the implementation of the roadmap asking if the Department can assist the Committee by informing it on when Members should follow up on the progress of the solar geysers. It has been a year and there has been no significant difference. 

Mr K Mileham (DA) added that it has been five years since the Department of Energy took over the solar geyser programme however in the five years, the Department has incurred R289 million in fruitless and wasteful expenditure. There is no urgency to complete this programme. It seems that installation will be completed in 2021 unless the Department can provide a better timeline. Why is the programme driven through a centralised program of the Department? Why is it not being funded and rolled out through the municipalities themselves to have the geysers installed? It seems overly centralised and complicated. Government cannot continue to incur further storage costs for the geysers. Some become damaged and unusable because they have been in storage for long. Secondly, PetroSA is also involved, but how does it fit with the Department’s mandate or experience to install solar water heaters? Thirdly, the training of installers has been discussed for over a year – it was even discussed with the Portfolio Committee which existed prior to the elections. This means this discussion has been ongoing for two years. How long does it take to actually train installers? How do they get certified to do installations?   

Ms K Hlonyana (EFF) said fruitless and wasteful expenditure defines the programme - more money has been spent on other things other than the installation itself. There are installer and audit companies that do the auditing. The incorporation of the audit companies would have been appropriate in the programme so that there is better coordination because there is a gap and when there is a problem it is not quickly addressed to ensure that units are installed. Secondly, the Department has given a background of the problems of these units - are all the parts manufactured and assembled in South Africa or are the parts still being imported? How many people have been trained for installation? Is there a database on how many people have been trained? A proper plan and a proper report are needed to see if the programme is working.

Ms V Malinga (ANC) was stunned that the then Department of Energy decided to allow Eskom to implement this social impact programme however Eskom has since had to return the money as they did not implement the programme. Has the Department checked with the provinces on the number of dysfunctional water heaters? There is no mention of the solar heaters - it is only mentioned in the 2020/2021 Annual Performance Plan (APP). What is the future of the national solar water programme beyond the procurement programme?

Ms C Phillips (DA) noted there are geysers worth R4 million that have been stolen as of 31 March 2019 and a full investigation was going to be held to determine the losses. Who is going to pay for those losses? Will it be the manufacturer or the Department? Do the 87 000 geysers that have been stored actually exist?

Mr M Wolmarans (ANC) said that it is unfortunate that the new DG has had to inherit this mess. Since last year, the Department has come up with a plan to try and fix the mess. The timeframe it has set for itself has now been disturbed by COVID19. With regard to training and empowerment of women and disabled persons, is there a database available? Has this training and empowerment spread to provinces and municipalities? Is there local manufacturing of the geysers? Who is manufacturing them? What is the status of the manufacturer in terms of the transformation agenda of government? In terms of slide nine, there was a rebate that occurred. How has that rebate been implemented? Is that rebate still applicable?  Where is the report with regard to the poorly installed geysers that the Minister undertook to have repaired?

Mr D Mthenjane (EFF) said one of the reasons for the implementation of this programme was to create jobs and to empower people to install solar water heaters yet this did not happen. He disputed the installation of the geysers when the programme was established. The Department intended to install 100 geysers per day which means 365 000 geysers per year but only 86 000 were installed. These numbers are inconsistent with the department’s five-year goal. Further, the Department keeps changing the targets - from 2009 – 2014, itwas 1 million and then from 2009 – 2020 it was going to be 5.6 million but these targets have not been reached. Is there no report on how many geysers were stored? There is no report on whether a case was opened with regard to the stolen geysers. The Committee wants accountability.

The Chairperson added that government needs to give the Committee confidence that it is dealing with the issues. It seems that the report is divided into three and in those periods, it does not seem anything has happened. The DMRE is coming in as an intervention to rescue the process. There are decisions that have been sanctioned by Cabinet but which have not been adhered to. The manufacturer trains the installers. Transportation is also a problem as it also has financial implications. What is the status of the intervention? The Department considered appointing a firm of auditors to perform a forensic investigation but the Department decided the matter should be handled by Treasury - how far is the matter and at what point will there be a conclusion? What are the internal processes of the Department with regard to people who signed contracts with others that did not have a clause for transportation? Why was the Department of Human Settlements considered and not the Department of Public Works and Infrastructure, which would have had some of the storage facilities? There are municipalities that are not attending meetings - how are they held accountable? These municipalities need to participate in the installation of geysers. Where is the information on where the geysers are stored and distributed?

DMRE Responses

Adv Mokoena said the Department would provide the Committee with a report on the forensic audit. The Department will ensure justice is done with regard to the matter. The Committee will indicate to the Department in what manner Members would prefer the report be provided. The Department has daily discussions with the Minister because he wants consistent reports on what is being done with the solar geysers.

Ms Mokgadi Modise, DMRE Chief Director: Clean Energy, answered that in 2015, a new implementation model was taken to Parliament which took into consideration the potential or benefit that would come with economies of scale. The model also considered the present scenario that solar geysers are not cheap compared to electrical geysers. The model of moving from the rebate to the social component with the rebate units was imported so that suppliers would install and then get the rebate from Eskom. The Department looked into this and acknowledged that there is a lot of money that goes into the rebate component as opposed to the actual implementation. It is also unfortunate that the move from phase one to two took some time so as to ensure there are no major problems in the current phase two model. In terms of the research issues, this is where the main disappointment came from because procurement was done before the contracts were signed with municipalities – this made it impossible to deliver.

PetroSA is part of the installation programme however it only procured the necessary skills in the project management space with regard to engineers who understand the energy sector. In the mapping flow process, there is the quality assurance analyst that is performing the same functions with regard to auditing. The Accounting Officers, Executive and even the Minister would be able to log into the database management system to track any municipality, how many new units have been installed, serial numbers and who are the beneficiaries. The auditing process has been incorporated throughout the process. The units will be tracked from the manufacturer from the municipality and from the municipality to the household.  

The Department has not consolidated the database for the people trained. The Department does acknowledge the “shady” work that was done in terms of those courses because they were not accredited. Hence it was important to work with Higher Education and Training.

In October, when several questions were being asked on the programme, the Department was asked to scale the full details covering the issues at the time were and how they have been addressed.

The manufacturing of the components is done in the SA and there is no longer any importing. The local content of those units have to meet standards set by an institution appointed by the Minister of Trade and Industry that follows the practice note in terms of government local production and content as released by National Treasury in 2014. Companies that have been appointed have met the local threshold of 70% collectors.

One supplier did experience theft at its own storage facility. The matter was reported to the Department and the Office of the State Attorney is handling recovery of units stolen. The units that have been stolen are more copper pipes than tanks or collectors. Those that have been stolen are linked to the allocation of contractors.

Progress has paused due to COVID19 with regards to installation and training. The Department is currently engaging the training institutions and venues, owners of the venues regarding training to be conducted to ensure there is full compliance during COVID19.  The Department is ensuring that Personal Protective Equipment (PPE) for learners will be provided. The budget is R52 million but that can slightly change when training commences due to COVID19.

From the manufacturers’ side, their statistics on jobs created by each of the manufacturers and involvement of youth, women and disabled persons in installation, will be shared. Information can also be shared in terms of how many have been involved through those companies along with technical feasibility studies which have been concluded.  

The rebate has been discontinued - it ended with Eskom at the time that the revision of the model resulted in the social component being approved by Parliament. There are no rebates for the installation companies. The Department procures centrally and caters to the municipalities or beneficiaries for free.  

There is a report on how to approach the repair and replace, to analyse whether it is worthy to replace, or repair and which process is worthy. There are records of what has been stored since working with Eskom. 150 have been installed in Sol Plaatjie. 200 have been installed in Nelson Mandela Bay to test the new viability or suitability of the new model as the rebate programme is moved away from.  

The current contract between the Department and manufacturers was clear that in light of the warranty, which kicks in after the five-year basis is complied with, there is the perception that there would not be any problems in terms of post-installation. 

The training does not take long – it takes less than two weeks to ensure that all those who are appointed to install comply with all installation manuals of occupational health and safety requirements. In June, the Department will ensure all compliance issues in terms of installation are dealt with.

In terms of risk that has been identified in municipalities or any storage facility with respect of the assessment of all storage facilities and security, measures were put in place to address issues of theft. For example, the facility needs to have padlocks, alarms, CCTV and 24-hour patrolling to ensure there are no loopholes should anything happen.  

A Department official added that DMRE hired 11 installation companies which are all 100% BBEE. There are companies owned by women and young people. The rollout programme depends on the number of teams deployed by each installer. There are 18 municipalities that have two installers and in those they install a minimum of four to five geysers per day. The deployment of Eskom is complementary to the Department’s work.

With regard to transportation of manufacturing, most of the solar energy geysers were installed in Johannesburg and there was one company in Cape Town, Eastern Cape and KZN. Because of the major manufacturing in Johannesburg, there was a need for transportation to multiple municipalities in the country. The transportation itself is advanced.

Follow up questions

Ms Malinga questioned why, if the Department has auditors and tracking systems, why was it unable to track the 500 stolen goods. The Department can use this to verify if the tracking systems are functional.

Mr Mileham followed up on his question about how long the training takes. Secondly, some of the geysers have been in storage for five years but there is no indication as to the cost for storage that the Department has incurred. There does not seem to be any urgency from the Department to speed up the process and rollout. Why can the Department not say how many people have been trained?

Mr Mthenjane mentioned that the report is not satisfactory. The DG is discussing taking responsibility, what responsibility is it? Is there going to be an arrest with regard to the stolen goods?

The Chairperson said that in the DG’s report, there is still mention of challenges faced. In the programme’s fiscus budget, in October a decision was taken where National Treasury was recommended to undertake the investigation. What is the role of the Department of Public Works and Infrastructure? Why was it not considered in this programme? Who was principally responsible for the programme? Is there internal action taken by the Department?

DMRE Response

Adv Mokoena said the Department will ensure there is compliance and quality assurance. Storage costs are only applicable until March 2020. There is only one company that has 7 000 or 8 000 geysers that must still be released. The Department will engage with National Treasury in terms of the full report on the work being done with regard to the forensic investigation. This process will go hand- in-hand with those who have gone against the law to ensure justice is served. When the Department appears in front of the Committee again, it will be able to provide a progress report. There was an interaction with Public Works to ascertain whether there are any storage facilities, but DMRE did not receive anything from Public Works. Some of the service providers were not accredited and that is why the Department of Higher Education was also involved to ensure accredited service providers.

The Chairperson requested that the Department report back to the Committee on the progress made with regard to implementation and action taken by the end of September. The Committee, in its next oversight visit, would like to visit and see some of the storage facilities and other matters mentioned. The focus will be on successful programsme and areas with challenges. The Department must follow up on the investigations by National Treasury. Lastly, the internal intervention and consequence management steps that the Department has taken must be presented.

Draft Report of the Portfolio Committee on Mineral Resources and Energy on the Strategic Plan 2020 – 2025, Annual Performance Plan for 2020/2021 and the Budget Vote No. 34 of the Department of Mineral Resources and Energy, dated 02 June 2020

The Report was adopted by the Committee with amendments.

While not rejecting the Report, the DA and EFF reserved their rights.

Consideration and adoption of Draft Committee Minutes

Committee minutes of meetings of 7 May 2020, 12 May 2020, 19 May 2020 (two sets) and 26 May 2020 were adopted with amendments.

Committee minutes dated 26 May 2020 were not adopted as they were minutes from a joint meeting. Therefore the Committee was unsure whether the minutes would have to be adopted jointly.  

The meeting was adjourned.